A bipartisan group of Senators that include Democrats
Sheldon Whitehouse (D-RI), Ron Wyden (D-OR), and Elizabeth Warren (D-MA) along
with Republicans Chuck Grassley (R-IA) and Marco Rubio (R-FL), have written a letter
commenting on the Treasury Department's proposed
Access Rule under the Corporate Transparency Act. The move underscores the
bipartisan commitment the Senators have to the new law and their willingness to
ensure that its implementation remains true to their original Congressional
The Corporate Transparency Act Access NPRM
The Corporate Transparency Act will require more than 30 million companies in the U.S. to prepare and file a report that discloses the identities of their beneficial owners and specific items of personally identifiable information (PII) regarding those beneficial owners. Those companies will file their reports with FinCEN - the Treasury Department's Financial Crimes Enforcement Network (FinCEN). FinCEN, in turn, will store this database of beneficial ownership information (BOI) in a massive registry to be used in assisting law enforcement.
On September 30, 2022, FinCEN issued its final rule on beneficial ownership reporting (the "Reporting Rule") and, in December, issued its initial notice of proposed rule making with respect to the ability of law enforcement to obtain access to the BOI registry (the "Access NPRM").
The letter issued by the Senators in March 2023 deals with the Access NPRM and the ability of banks and certain governmental agencies to obtain access to the BOI registry.
Bipartisan Concerns with the Access NPRM
The Senators wrote to FinCEN to voice their concerns about its Access NPRM and the restrictions the proposed regulations would place on banks and some law enforcement agencies to access and use the BOI registry. The letter provides:
"While we appreciate the time and effort you have put into the implementation of this critical law, we have concerns that this proposed rule strays from congressional intent and erects unnecessary and costly barriers to accessing beneficial ownership information that risk undermining the utility of the beneficial ownership directory. . . . We encourage you to revise the rule to ensure it tracks closer to the text of the statute, remove excessive barriers to accessing the directory by authorized recipients, and enhance the utility of the directory."
Proposed Changes to the Access NPRM
In their letter, the senators ask FinCEN to modify its proposed regulations in ways that will generally make the BOI registry more easily accessible and more widely useable. In particular, they have asked FinCEN to:
Ensure that state, local, and tribal (SLT) law enforcement are able to access the BOI registry more easily;
Ensure that law enforcement will be able to use BOI in court at the conclusion of a case;
Eliminate and clarify certain filing requirements that, as drafted, risk slowing investigations, overwhelming FinCEN's capacities, or generating delays in the financial system;
Establish an automated FinCEN process for fielding and responding to requests for BOI from financial institutions;
Broaden the scope of the proposed regulations so that financial institutions can use BOI across their anti-money laundering (AML), counter-terror financing, sanctions screening, and broader financial crime compliance programs;
Ensure that the Treasury's Office of Inspector General and the Comptroller General of the United States have access to the BOI registry;
Mandating that BOI reported to FinCEN be verified by the agency; and
Ensure FinCEN creates clear, concise, and tailored templates, forms, training videos, and step-by-step guides to help authorized recipients request and access the BOI directory.
Implications for FinCEN and its Access NPRM
The bipartisan nature of these comments will have implications for FinCEN and its Access NPRM.
First, FinCEN has a lot of work to do. It was already engaged with developing the database and IT system required to implement the Reporting Rule. That work needs to be completed before January 1, 2024 so that reporting companies can begin uploading their beneficial ownership reports on that implementation date. The issues raised by the Senators may require FinCEN to complete additional work as a prerequisite to completing the BOI registry.
Second, the Senators who are responsible (in large measure) for funding FinCEN are not happy with FinCEN's Access NPRM. Issuing a public letter like this one is a red flag for FinCEN's leadership. They must now either (a) convince the Senators they were mistaken (and provide them a face-saving means of reversing themselves), (b) change the Access NPRM to incorporate the Senators' requested changes or (c) risk the political consequences of defying the Senators on these points.
Choices (a) and (c) seem unlikely (to say the least), so choice there is a significant likelihood that FinCEN is going to modify its proposed Access NPRM to address the Senators' concerns.
Third, these changes are going to come down to the wire. As of this writing, there are roughly 280 days remaining to the implementation of the CTA on January 1, 2024. Whatever changes FinCEN adopts to its Access NPRM will need to be finalized and socialized with stakeholders (like these Senators and the banking interests who are tracking these issues) and then implemented with IT systems and procedures within those 280 days.
About The Author
Jonathan Wilson is the co-founder of FinCEN Report Company with 31 years of experience in corporate, M&A and securities matters. He is the author of The Corporate Transparency Act Compliance Guide (to be published by Lexis Nexis in the summer of 2023) and the Lexis Practical Guidance Practice Note on the Corporate Transparency Act.